Mortgage rates are staying close to their all-time lows this week, a popular survey shows, and that’s a blessing for homebuyers who are dealing with overheated prices during what has become a sizzling summer for home sales.
The usual peak spring buying season is underway very late this year because of cornavirus lockdowns earlier in 2020. Dirt-cheap mortgage rates are giving house shoppers more buying power and are partially offsetting the price increases.
But experts say borrowers should move quickly, because rates are likely to rise before long as lenders start dealing again with a new fee that’s currently on hold.
Mortgage rates stick close to all-time lows
Mortgage rates have ticked up to an average 2.93% for a 30-year fixed-rate loan, from 2.91% last week, mortgage company Freddie Mac said Thursday.
One year ago, the typical 30-year mortgage was going for a steeper 3.49%. The loans in the survey come with an average 0.8 point.
Rates remain just a few steps away from last month’s record low in the Freddie Mac survey, which has been tracking rates on home loans for nearly half a century. Thirty-year fixed-rate mortgages sank to an average of just 2.88% on Aug. 6.
Mortgage rates are so low that they’re allowing homebuyers to purchase higher-priced homes, according to a new analysis from the real estate brokerage Redfin.
A buyer wanting a $2,500 monthly house payment could afford a $516,500 home this summer, versus a $483,250 house that was affordable on the same budget during the summer of 2019, when rates were higher.
The cheap rates are partially offsetting house prices that are rising sharply amid heavy demand coupled with a shortage of homes for sale. The nation’s median listing price last month hit a record $350,000 — up 10% from a year ago, says Realtor.com.
But homebuyers hoping to take advantage of today’s unbelievably low mortgage rates may not have much more time, and the same goes for homeowners looking to score big savings by refinancing.
The clock is ticking on extremely low rates
Rates popped in mid-August after lenders were surprised to learn that a new 0.5% on refinance loans would take effect on Sept. 1. Following some uproar, a federal agency postponed the surcharge — but not for long.
“Mortgage rates could begin to see modest increases once lenders begin to reapply the price adjustment,” says Matthew Speakman, an economist with Zillow. “For now, mortgage rates are enjoying another strong stretch back to long-term lows.”
Though the fee is technically delayed until Dec. 1, experts say lenders could start to factor it into their rates as soon as next month. So, if you’re thinking about shopping for a home or are a homeowner who needs to refinance, you’ll want to move fast.
Start comparison shopping for a bargain rate now. Get mortgage offers from at least five lenders and review them side by side, to find the lowest rate available to you.
Your credit score will play a major role in what lenders offer you, says Speakman.
“These record low rates only apply to the most creditworthy borrowers with straightforward loans — people with weaker credit or seeking less typical loan types are being quoted much higher rates,” he says.
While you’re comparison shopping, look at rates on homeowners insurance, too. If it’s time to buy or renew your policy, go online and gather quotes from several insurers to make sure you don’t overpay for your coverage.
What other mortgage rates are doing
The latest Freddie Mac survey shows rates on other popular types of mortgages are mixed this week.
The average for a 15-year fixed-rate mortgage has fallen to 2.42%, from 2.46% last week. Fifteen-year mortgages are a popular pick for refinance loans, and the rates are down quite a bit from a year ago, when the average was an even 3%.
Meanwhile, rates on 5/1 adjustable-rate mortgages, or “ARMS,” have risen a few notches. The rates on those loans are fixed for five years, then can adjust up or down each year, depending on how other interest rates are moving.
ARMs are currently being offered at starter rates averaging 2.93%, up from 2.91% last week.
At this time in 2019, the typical initial rate on a 5/1 ARM was 3.30%.